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HomeMy WebLinkAbout2003/09/22 - Agenda Packet - Spec (Budget) AGENDA RANCHO CUCAMONGA REDEVELOPMENT AGENCY, FIRE PROTECTION DISTRICT AND CITY COUNCIL SPECIAL MEETING Monday, September 22, 2003 ~ 5:00 p.m. Rancho Cucamonga City Hall ~- Tri Communities Room 10500 Civic Center Drive + Rancho Cucamonga, CA 91730-3801 A. CALL TO ORDER ~. Pledge of Allegiance 2. Roll Call: Alexander , Gutierrez , Howdyshell , Kurth , Williams__ B. COMMUNICATIONS FROM THE PUBLIC This is the time and place for the general public to address the Agency, Fire Board and City Council. State law prohibits the Agency, Fire Board and Council form addressing any issue not previously included on the agenda. They may receive testimony and set the matter for a subsequent meeting. Comments are to be limited to five minutes per individual. C. ITEM OF BUSINESS CONSIDERATION OF BUDGET STRATEGIES FOR DEALING WITH THE IMPACT OF STATE BUDGET DECISIONS FOR FY 2003-04 D. ADJOURNMENT I, Debra J. Adams, City Clerk of the City of Rancho Cucamonga, hereby certify that a true, accurate copy of the foregoing agenda was posted on September 18, 2003, per Government Code 54954.2 at 10500 Civic Center Drive, Rancho Cucamonga, California. City Manager's Office To: * Mayor and Members of the City Council, Fire Board, Redevelopment Agency From: Jack Lam, City Manager Date: September 17, 2003 Subject: Consideration of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 In June 2003, the City adopted its FY 2003-04 Program of Services Budgets. At the time of adoption, the State had not adopted a final budget, leaving local government in a state of "limbo" with respect to dealing with the State budget. Therefore, Rancho Cucamonga adopted a budget based only upon factors known to that date. The City knew that we would have to revisit the budget and address any State budget outcomes. It was the rational choice to make. As stated last June, the State budget crisis is the number one threat to local government budgets. This external factor puts Rancho Cucamonga in a challenging position. On one hand, the City is poised to attain many of its long-range goals and on the other hand, the State takes away and restructures our revenue sources. This makes for the most challenging of balancing acts needed to bridge the challenges of today and the promising opportunities in the City's future. Developing a balanced budget in any given year is challenging enough without having to deal with the State. In June, the City, as with other jurisdictions, had to accommodate large increases in fixed operating costs due in large measure to factors beyond our control: dramatic increases in worker's compensation costs, medical insurance, liability insurance, PERS rate increases, new police contract costs, etc. For example, the General Fund revenue budget for FY 2003-04 increased by $694,330 but increased fixed costs exceeded $2 million. The new revenue included $161,530 of fund balance. The General Fund, therefore, experienced a 3% effective decrease in service support of existing programs as the result of having to accommodate these fixed cost increases. This decrease was done primarily through M & O costs and personnel cost reductions. The City also had to take into consideration some known State actions at the time such Consideration of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 2 September 17, 2003 as the loss of State Library Funds and mandated costs reimbursements. These service impacts have resulted in some inconvenience to both staff and' customers alike, but essential services were preserved. All budgets were balanced! The State took up the final budget trailer bills last week and the impacts to local agencies from these decisions are now known. The impacts to Rancho Cucamonga can be summarized as follows: · VLF Backfill Gap: In June 20033, the State "puiled the trigger" to administratively raise vehicle license fees to their original 1998 level.. The increase is to be fully implemented by October 1. Although the restored vehicle license fee revenue will go to cities and counties (the histo.ric recipients of this revenue), the budget allows the State to take the scheduled vehicle license fee backfill payments for July, August, and September ($825 million statewide). AB 1768, one of the budget trailer bills, specifies that the payment of backfill money that is owed to local governments during this gap be deferred until August 2006. The repayment at that time is without interest. In addition, the State withheld the VLF backfill payment for the period June 20 - June 30 (the last 10 days of the fiscal year after the VLF trigger was pulled) which represents a loss of approximately $151,361 for FY 2002/03. AB 1752, another of the budget trailer bills, would increase the percentage of VLF monies dedicated to realignment from 24.33 percent to 28.08 percent to make up for the realignment backfill money that would have been paid during the "gap". Impact on Rancho Cucamonga: $1.873 million loss in FY 2003/04 ($1,448,265 due to'backfill "gap"period and $425,316 due to increase in realignment percentage). · "Triple Flip": An element of the State budget includes a provision to take half of the 1% local sales tax rate to secure bonds covering neady $12 billion of the State deficit (flip 1). This exchange would be in effect until all the deficit bonds are paid off (estimated to be five to six years). The exchange would begin in FY 2004/05. The State intends to replace this revenue with the ERAF property tax money that was taken from cities and counties in the early '90's (flip 2). Using ERAF money to backfill the sales tax taken from cities will increase the State's obligation to fund schools from other general fund resources (flip 3). Growth in the amount of ERAF backfill in future years will be tied to local sales tax growth. Currently one of the issues regarding this swap is the cash flow issue. Sales tax is received monthly and property tax is received in late December/early January and late April/early May. There will be some loss of interest income to the City (and a gain for the State) because of the cash flow differences. Consideration of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 3 September 17, 2003 Cash flow will also be impacted due to a delay in the reconciliation of the sales tax advances (which are based on the prior year's actual revenues) and the actual Sales'tax receipts. Currently, this reconciliation process is done within three months of the end of each quarter with positive or negative adjustments being remitted with the next monthly payment. However, under the "triple flip" plan, this reconciliation process would not be completed until January following the fiscal year end. Impact on Rancho Cucamonga: Estimated loss of interest income of $85,930 in FY 2004/05; potential additional loss of interest income due to delay in reconciliation of sales tax advances to actual sales tax receipts. Furthermore, from a cash flow basis, half of the City's new sales tax revenue after the implementation of the Triple Flip will not be realized dudng the same fiscal year in which it was generated but will be made up one year in arrears. Thus any fiscal planning that the City had in place regarding future revenues must now take into consideration this delay and any interim financing plans must now bddge this gap. These considerations will have to be made beginning FY 2003-04, especially with respect to the future planned operating costs for the Cultural Center and Central Park that were to coincide with the receipt of new sales tax from Victoria Gardens Shopping Center. · Mandated Costs: The State places a variety of mandates on local governments, then reimburses those agencies for some of the costs of compliance. Because the State has been very inconsistent in prior years with respect to these reimbursements, the City did not expect the State to pay them so we did not budget much in revenues. For FY 2002-03 the State was to provide Cities with $1,000 for each State-mandated program with which it complied. However, the City received no mandated reimbursement funding in FY 2002/03 even though the City complied with the programs. The State's FY 2003/04 Budget defers, suspends and repeals various mandates. The League of California Cities is in the process of compiling a complete list. We are continuing to submit claims, however no funding will be forthcoming until this program receives an appropriation by the State. Impact on Rancho Cucamonga: Loss of $5,000 budgeted reimbursement (Lacking confidence in this program, the City did not budget much). · Redevelopment Funds: During the last weeks of the legislative session, there was growing interest by certain legislative circles in increasing, to $250 million, the $135 million cut to local redevelopment agencies (RDAs) included in the state budget. The rationale was to use this money to restore funding to other programs that fell under the budget ax. However, due to strong opposition forces, this effort failed. Therefore, the cut to redevelopment agencies remains at $135 million. For Rancho Cucamonga's Redevelopment Agency, this results in a $2.02 million loss of tax increment that will have to be paid to the State by May 2004. This loss of tax increment means that about $20 million of bonding Consideration of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 4 September 17, 2003 capacity is lost, requiring delayed funding for identified infrastructure programs within the project area such as the Haven Avenue grade crossing. This will affect the ability to fund such projects for years to come. Furthermore, because of the continued turmoil with respect to the State, (political uncertainties and legal challenges to State budget maneuvers) any new RDA bond measure for infrastructure is put on hold for the time being. · State Library Funds: In the last two years, the State has cut Rancho Cucamonga's State Library Funds from $208,000, then to $1'09,000 to the ' current $56,000. Direct Loan funds were reduced by 20%. As a result of such losses and instability of State library funding, the adopted budget "zeroed" o~t state library funding. Furthermore, the hours of operation were slightly modified and the other hours continued to be shored up through continued General Fund support. Currently, the General .Fund support for the library is $227,620 but the General Fund is now faced with a $1.878 million direct loss as the result of final State action. · Reduction of COPS Pro,qram fundinq: Statewide, COPS program funding has been reduced from $125 million to $100 million. For Rancho Cucamonga, this cut will mean a reduction from $272,323 to $218,529. During this past year, the various proposals from the State were all over the board, making it challenging, at best to do budget planning. Our City, decided to take a. measured, phased approach by adopting a budget in June based upon known factors at the time and make necessary additional decisions once other information is known. The same logic must prevail about what information is known at this time. Although the State budget has been approved, various legal challenges to significant components of the budget, the uncertainty of the Governor's race, and the fact that the State will continue to have a large deficit next fiscal year means continued uncertainty. Our City must still try and make the best decisions based upon current known factors, in spite of these continued uncertainties in the future. This will mean more incremental decisions requiring a delicate balancing act with remaining revenues, adjustment of programs, and bridging the span between challenges and future opportunities, for which the City cannot afford to neglect. For the next two years and the foreseeable future, the specter of the State budget crisis will continue to hover over local government budgets. PROGRAM OF ACTION: The objective is to preserve basic services as much as possible while addressing the critical loss of revenue. As mentioned above, cuts have already been made to existing service funding from the adoption of the City budgets in June. The City must now address the latest round of cuts--S1.878 million in direct General Fund cuts, and $2.02 million in Redevelopment Agency cuts. Sizeable General Consideration'of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 5 September 17, 2003 Fund 0 & M cuts were made in the June budget, including de-funding of various positions. The following outlines new actions recommended to address the current round of State budget cuts: · Transfer Remaininq Concrete Contract From General Fund To Measure I. A portion of this program was transferred in the June budget adoptions. This is normally a General Fund capital maintenance expense and the impact of this shift will be reduction of Measure I funding for other capital projects, but will help preserve operations. This is an example of State Funding cuts having a domino affect on city programs, and under the present fiscal circumstances, this approach is a necessity. General Fund Cut: $244,360 · Suspension of Computer Equipment Depreciation Charqes (veh c e depreciation was suspended last June). There will be no depreciation charges for any equipment. This will disrupt, for the time being, the system of depreciation and replacement of equipment that until now, functioned flawlessly. However, under these current fiscal circumstances, it is justifiable to look to suspend these before direct service cuts. Because these systems are currently fully funded, a one to two year depreciation suspension is repairable in future years. General fund Cut: $300,930 · Additional Personnel Adiustments. The budget already de-funded certain positions that became vacant last fiscal year. Management proposes to continue to monitor attrition and make rational judgments regarding re-filling, under-filling, contract work, temporary contract back-fills, and other position adjustments to make the best of these difficult circumstances. Making these adjustments (19 positions-various departments) helps provide flexibility necessary to ensure the least amount of internal organizational disruption. While work force reduction, even through attrition, weakens the capacity to provide the most timely service, the organization understands the fiscal challenges that the State budget crisis has placed on local government and understands that using continued attrition management including position restructuring, is the least painful option. The impact will be less people dealing with a large workload resulting in further inconveniences internally and externally. Adjustments in positions will also be made among special funds including the Utility Enterprise Fund. General Fund Restructured positions cut: $32,627; General Fund Positions not replaced cut: $380,737; General Fund Salary Savings (mid-year fill): $21'1,651; · Additional M & O Reductions. The adopted budget already accounted for significant M & O cuts to help compensate for a $2 million increase in fixed operating costs in June. Therefore, additional M & O cuts are much more limited. Services are performed by people. The people we have need the materials and supplies to enable them to perform the services. General Fund Cut: $52,800 Consideration of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 6 September 17, 2003 · Further Adiustment of Library Hours. The General Fund currently provides $227,620 of General Fund support even as the State has cut over $200,000 of Public Library Funds. Other libraries have had to look at further adjustment of hours and materials budgets for savings. Proposed is the Friday closure of the Library beginning October 2003, plus two additional days during the remainder of the fiscal year (the least impact days to be selected) and a reduction in M & O (books and repair). General Fund cut: $108,000; Net Library Cut: $68,000 (See RDA Offset) · Reduction of Contract Planninq Services. The Planning Department relies upon full time and contract personnel to supplement planning services. The budget situation will necessitate reduction in contract personnel from the General Fund. Impact will be higher workload on fewer resources resulting in potential longer review periods. General Fund Cut: $100,000 . · Redevelopment Agency adjustments. The Redevelopment Agency must remit $2.02 million to the State by May 2004. This is a literal "take away." Furthermore, no RDA bond issue can be implemented at this time, pushing back any infrastructure projects in the bond pipeline. RDA Cut: $2.02 million · COPS Proqram. The COPS Program, while cut, still contains basic revenue for the hiring of police officers. The City has utilized these funds in the past to fund the City's share of match money for the Federal COPS Universal hiring program. As the last Federal Program Funds have been transitioned last fiscal year, the State COPS funds must be directed to the hiring of officers only. Since the City has projected law enforcement needs with the development of the Victoria Gardens Regional Shopping area to open in October of 2004, the City must begin directing its attention to begin arranging for these officers. The State COPS money that is no longer used for matching the Federal Program will be combined with the reduced allocation of State COPS funds for FY 2003-04 to fund the first four new deputy positions ($368,220). Funds for these officers for the next 1t/2 years will be from State COPS funds. · Contract Assistance and Interim Mitigation. Because of the various major special projects currently funded by the Redevelopment Agency, some eligible portions of the time City personnel works on review and inspections of these projects (NOT ALREADY COVERED BY FEES FOR SERVICE) may be partially offset by RDA funds. Furthermore, additional inspection and/or contract work associated with these projects are paid by the Agency. Projections of the eligible offsets have been made and such offset funding will be set aside by the Agency in project accounts to mitigate these contributions to these projects. These mitigation funds can assist each department but will not impact the General Fund. Planning Department: $75,000; Engineering Department: $85,000; Building and Safety: $165,000; Fire Department: $12,000; Community Services: $140,000; Library: $50,000. The Agency will also Consideratiori of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 7 September 17, 2003 , provide for the donor software for both Community Services and the Library. · Use of City Reserves. The Reserve for Economic Changes is what is generally referred to as the City's Reserves. The City has maintained a six month operating reserve with respect to the budget. Reserves are set aside for temporary, unusual fiscal circumstances which create budget hardships and enable the budget to transition from such a year to the next. While the Sta~e has represented that local government cuts are just one time cuts (leaving one to think that these will not be repeated next year), there is every reason to believe that the State may find itself in the same predicament the following fiscal year. Add to that, the unpredictable nature of the governorship and all its implications, longer term fiscal planning becomes impossible, limiting our options to more incremental decisions that themselves are subject to further changes during any given fiscal year. All the recommendations above have been crafted to preserve the greatest.po/tions of vital programs while creating the least amount of disruption possible. This reflects the reality of local government's fiscal dilemma. Any further cuts at this time will involve more painful decisions, which may or may not be neCessary next fiscal year, regardless of anybody's speculation about next fiscal year. Given the unpredictability of future actions by the State, and the need to know for certain whether continued cuts will be made by the State next fiscal year, we recommend all the incremental decisions included above and the use of $441,895 in reserves to carry the City through this fiscal year and not cut programs any further until we determine what further actions are contemplated by the State for next year. In the meantime, the recommendations address the majority of the State cuts and the small amount of reserves utilized is a prudent wait and see maneuver. Other fiscal developments could play out by the end of the fiscal year. Although the State Triple Flip was adopted, it does not come into affect until July 2004. There is the possibility that sales tax receipts this fiscal year could be larger than predicted, given the recent infilling of previous vacant retail buildings. There is the (remote) possibility that the State could backfill some portions of the cuts. Both these possibilities could actually counter balance the use of these reserves. There is also the possibility that the State's fiscal condition could be worse and other negative actions could result. In any case, the goal of preserving our services as best we can at this juncture compels the Staff to recommend the prudent use of some reserves at this time to rebalance the FY 2003-04 budgets. · Update & Revise Fee Schedules. It is prudent to update and revise City fee schedules to ensure that our fees are current. While some of the City's capital fees have been revised recently, some service fees have not been revised for Consideration of Budget Strategies For Dealing With The Impact of State Budget Decisions FY 2003-04 Page 8 September 17, 2003 some time. It is prudent under these fiscal circumstances that fees relate to the present cost of doing business. RECOMMENDATION: Should the Council concur with this strategy, staff will implement [hese actions through the necessary technical budget adjustments and internal systems, all of which will. be ultimately reflected in the mid-year budget for FY 2003-04. · Net General Fund Cuts: $1,431,105 · Net use of General Fund Reserves: $441,895 · Redevelopment Agency Cut: $2.02 million · Update and Revise Fee Schedules